Philippines fastest growing corporate bond market in East Asia

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The Philippines continues to have the fastest growing corporate bond market in the emerging East Asia region, expanding by 27.9 percent year-on-year in the first quarter of 2014, Manila-based lender Asian Development Bank (ADB) said.

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In the latest Asia Bond Monitor report, ADB said that the total outstanding local currency (LCY) corporate bond market of the Philippines during the quarter reached $15 billion from the $13 billion recorded a year ago.

The lender pointed out that firms continued to raise funds in the first quarter in anticipation of a sustained rise in interest rates as a result of quantitative easing tapering and growing inflation concerns.

“Firms with diversified operations and banks were the lead issuers of debt in the first quarter of 2014,” the ADB report stated.

The report also noted that growth in the corporate bond market outpaced that in the government bond market.

During the quarter, the government bond market contracted 7.8 percent year-on-year to $84 billion from $85 billion.

The lender traced the contraction to relatively low demand for government securities, reflected by market players’ caution over the quantitative easing program in the US and rising inflation in the Philippines.

The government bond market comprises outstanding fixed-income instruments issued by the Philippine government and government-controlled companies.

Overall, the total of outstanding LCY bonds in the Philippines reached $99 billion in the first quarter of 2014, a 10.5 percent increase from the $98 billion recorded in the same period in 2013.

The Asia Bond Monitor report provides market summaries of the emerging East Asia region, which includes China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

The ADB report noted that the outstanding size of the emerging East Asian LCY bond market for the entire region reached $7.6 trillion at end-March, up 9.5 percent year-on-year.

The lender said that local and offshore demand for emerging East Asia’s local currency bonds is rising again and should continue given strong economic growth prospects in the region.

“Most emerging East Asia bond markets have regained their bounce,” said Iwan Azis, head of ADB’s Office of Regional Economic Integration. Despite the recent improvements, however, the report warns that markets could still be jolted by the ongoing tapering in US quantitative easing, a slowdown in economic growth in China, or moves by the European Central Bank to counter the threat of deflation in the Eurozone.

Only by taking the lead in implementing better regulation and oversight of regional financial systems can Asia mitigate these risks, the report added.

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